Budget / 18 February 2019, 08:00am / Amanda Visser
JOHANNESBURG – Finance Minister Tito Mboweni will deliver his maiden Budget this week in an era that has been characterised by low revenue amid pressures to find funding for ailing Eskom and the government’s general expenditure framework.
Analysts say that the Budget, the first since former president Jacob Zuma’s administration, would need to be practical, while taking into account problems facing the country.
RMP Partners’ Andrew Wellsted said the Budget would be constrained by a tough fiscal space with low economic growth.
Wellsted said Mboweni was unlikely to raise taxes as the economy was weak.
He said many still believed that the government spending was a way to stimulate growth.
“I think we are going to see a Budget that is cautious on the tax side, and whether it is expressed or blatant it will give us some idea of how the money is going to be spent,” Wellsted said.
“There will be a general belt-tightening from the previous four or five budgets.”
The Budget would be closely watched by investors and international rating agencies.
Already, Moody’s has raised flags on Eskom’s ballooning debts and its threat to the fiscus.
Investors would also look at the May election and what the new political landscape would be.
The revenue shortfall was expected to ease from R50 billion in the 2017/18 financial year to about R27.4bn in 2018/19.
Delia Ndlovu, managing director of Deloitte Africa Tax and Legal, said Mboweni would have to prioritise growth and investment.
Ndlovu said Mboweni’s plans on Eskom would be watched closely as institutions such as the World Bank had already warned the utility was too big to fail.
“It is likely, then, that funding Eskom will occupy a central position in the Budget,” Ndlovu said.
Deloitte tax experts Anthea Scholtz and Claudia Gravenorst said they expected personal income tax to be the main contributor to the fiscus.
The two said the contributions could amount to 38 percent of the total tax revenues.
“It is clear from these statistics, that the man on the street is paying a significant amount of tax – both direct taxes such as personal income tax and indirect taxes, such as VAT,” they said.
David French, director of tax consulting at Mazars, said revenue collection would likely fall short of expenditure again this year with the government forced to increase the debt to the gross domestic product.
French said the cost of servicing the debt would grow from R181bn this year to R247bn in 2021/22.
He said Mboweni would struggle to find new revenue streams, as taxes had peaked. “There are no more innovative ways left for (the National) Treasury to raise more revenue through taxes,” French added.
“This has been discussed for quite a few years now and it is generally believed that any further increases in the major tax classes could prove counter-productive.”